Excellent read and one that is has been on my mind when playing some games. There has to be a 'fantasy' aspect to any game because in real life if you got shot even once then you are going down or even if your hit with a blunt weapon like a mace you are going down. Ever stub your toe just a little bit and remember that pain? Just imagine getting hit in the chest with even a small caliber gun or a metal weapon. Pain is going to be a factor in your fighting capabilities.

So unless ever game the PC has some sort of Warhammer-like Space Marine armor which could actually have some sort of HP on it then you just have to chalk it up to fantasy and go from there.

As for how to deal with this in a game, I have no idea. I've tried doing that in a post apocalyptic style car wars type game I was making when I was a kid. It didn't work out to my satisfaction, but one thing I did find out was that it easier to put HP on cars than it was to try and figure out how a bullet was going to effect a PC.